





DEPARTMENT OF THE INTERIOR, ; 
UNITED, STATES RECLAMATION SERVICE, 
Washington, D..C., March 10, 1916. 
To Members of Interstate Irrigation Commission: - 

As the result of correspondence and discussion with members of the 
Interstate Irrigation Commission and others interested in irrigation 
development, I have brought together a number of suggestions 
originating from various sources. I am sending herewith a copy of 
this material with request that you look it over and give me any con- 
structive criticism which may occur to you with a view to cones 
any errors or supplying omissions. 

It is necessary that there be more or less definite agreement upon 
some of these elementary facts, so that when the members of the 
Commission assemble they will be better prepared to get down to the 
real business of the meeting and not lose time in the discussion of 
these somewhat elementary facts. 
Very truly, 

F, H. NEWELL. 


85357—15 





IRRIGATION REVIVAL. 


General conditions—How can we arouse interest and stimulate 


further effort in the development of the West by means of irrigation? — 


This is a question not merely for the irrigators but even more so for 
the manufacturing and transportation interests of the whole country 
who find in the West one of their best opportunities. Because of the 
existing stagnation in irrigation development, millions of dollars 
invested in partly completed large works are lying dormant or are 
being dissipated. Even greater indirect losses are occurring because 
of the deprivation to the community of the value of the food supply 
which should be produced if these works were completed. 


It must not be supposed that because these new works are not 


being finished and others are not undertaken, that there is corre- 
sponding stagnation under the older finished irrigation systems. 
This is not the case. Wherever adequate water has been provided 
and other conditions are favorable, the irrigated area is steadily 
increasing and the aggregate crop return is steadily mounting. The 
most prosperous part of the country, taking everything into consid- 
eration, is that portion where the experienced irrigators are produc- 
ing and marketing their crops. In spite of this fact, however, the 
extension of irrigation systems to new areas has practically ceased 
and capital is no longer available for new works. 

Irrigation development can be revived in the same way, and only 


in the same way, that any other business can be built up; that is, | 
by showing that it pays; that the money invested will come back | 


with profit and interest. When this can be done there will be little 
cause for debate or complaint of delay in finishing the partly com- 
pleted works or starting new systems. Until convincing proof to this 
effect is available there is little hope of substantial improvement. 
As long as millions of dollars in irrigation securities are looked upon 
with bitter regret by the thousands of persons holding them and who 
are scattered throughout the country, there is little use of attempting 
to interest them or their friends in new schemes unless it can be shown 


that they rest on an entirely different basis and represent real values — 
and not mere hopes. In other words, the first move in irrigation reju- 


venescence is to establish the fact that irrigation investments pay, and, 
more than this, that they payin such a way that the investor will receive 
promptly the interest and profit on hismoney. If the investor is the 
State or Nation, it may be sufficient to show not a direct gain, but that 
a substantial profit is had in added population and general prosperity. 


(2) 


5} 


The problem of irrigation is really three-fold, and may be consid- 
ered under the heads of— 

First. More money—how to get funds to complete the works 
already begun or to start new works. 

Second. More settlers—how to get more skilled farmers to use the 
irrigated lands now partly cultivated. 

Third. Better farming methods, better crops, and markets—what 
are the most profitable crops to raise and how to handle these so as to 
obtain the most remunerative return. 

As previsously stated, if we can get more settlers to fully utilize the 
land they in turn can obtain better crops and market these to better 
advantage. They will be able not only to support their families but 
to make liberal payments and in turn it will be relatively easy to 
secure more money for new projects. Thus from one standpoint what 
we need immediately is not to worry about more construction until we 
have more completely utilized the resources at hand. On the other 
side, however, it is urged that now is the time to consider the revival 
of interest in new works because of the long time required to get any- 
thing of this kind in going condition. 

Throughout the arid West, there are scores of irrigation projects, 
in which considerable investments have been made and which if com- 
pleted would add materially to the State and National resources by 
providing opportunities for homes for citizens and ‘by furnishing the 
needed foodstuff. These projects if meritorious should be revived 
and the millions of dollars already invested by men who have hoped 
to make large profits should be saved in part at least before they are 
oradually dissipated through the deterioration of partly completed 
and unused works. One of the great questions before the West, and 
before the Nation, is the renewal of work on these important projects. 

Before money can be procured and new work started we must 
make plain the reasons of the present stagnation and, if possible, 
remove the causes. ‘These reasons have been given for one project 
or another as being bad financiering, reckless engineering, imperfect 
water supply, and a multitude of other causes each one of which may 
be true for some particular case. The real cause of stagnation, how- 
ever, lies further back and is summed up in the one question, Does it 
pay? 3 

Does irrigation pay?—It seems almost absurd at this date, when 
hundreds of millions of dollars have been invested in irrigation works 
and scores of millions of dollars of products are raised by irrigation, 
to ask whether it pays. Everyone knows that it does, and yet what 
everyone thinks he knows may not be wholly true. Some irrigation 
works have undoubtedly paid and their examples may be cited to 
prove that others should pay, but it is beginning to be suspected that 
the projects which are now stagnant and upon which great losses 


4 


have resulted are in this condition because somehow or other the 


investors of the country, both big and little, have become convinced 
that so far as they are concerned irrigation does not and can not be 
made to pay. If we can convince them to the contrary, there is 
ample money available for renewing work; if we can not, then we 
should plainly recognize the fact and do the next best thing. 

While every irrigation project may not pay the investor in the 
sense of yielding him a profit and interest on his investment, yet it 


may pay the State or Nation to directly or indirectly subsidize the. 


work and to encourage further development either by using public 
funds or by furnishing some form of support. ‘The indirect gain to 
the whole community is so great that few men will question the 
propriety of the public incurring some expense in this direction. To 


put the matter in another form, an investment of a million dollars. 
may not come back unimpaired and with interest to the investor, — 


but it may create other values enjoyed by the entire community to 
the extent of several millions of dollars. This is not a fanciful idea, 
as instances can be shown where irrigation works have never returned 
anything in the way of interest or profit to the owners, but have 
resulted in the upbuilding of agricultural communities, towns, and 
industries which in the aggregate have added millions of dollars to the 
Commonwealth. | 

Profits of farmer.—Going more definitely into the question as to 
whether irrigation will pay, we come to the fundamental proposition 
as to whether the profits of the irrigation farmer are such as to enable 
him to make the necessary payments for the cost of the irrigation 
works. We have assumed in the past that his profits have been 
large and that as a matter of course he could and would make the 
payments which enable profitable construction of irrigation works. 
It has been. considered as preposterous to doubt his ability, but of 
late, especially in connection with Government works, there have 
been loud protests of his inability. 

The studies made of the condition of the farmers by the Depart- 
ment of Agriculture, through its Bureau of Farm Management, of 
investments and returns from typical farms and of the census figures 
have revealed certain unexpected conditions. The results verify 
the somewhat disappointing conclusion that the average farmer 
under irrigation is obtaining only about 5 per cent on his investment 


and ordinary day laborer’s wages. In other words, if irrigation 


is to succeed we must have farmers whose skill and equipment is 
such that they can earn far more than the average urigator. It is 
this fact of the small average earnings which has kept back progress 
in further irrigation work. We can argue all around this and show 
that for one project or another there were faulty designs or unscrupu- 
lous promoters, but when we start on any constructive discussion 


¥ 


D 


we must establish beyond doubt the fundamental fact as to actual 
earnings of the irrigators and the probability that these can and will 
be increased. . Hee 

The reasons why the average farmer has not obtained larger returns 
are not far to seek. They le primarily in the fact that irrigation 
development means pioneering and the meeting of unknown condi- 
tions. Many years may be necessary in subduing the soil and discov- 
ering what crops are best adapted to the peculiar climatic conditions, 
None of these important details can be safely predicted. Moreover, 
market conditions in a new country are to be established and these are 
unstable; the crop which one year is profitable may next year be 
not worth removing from the fields. The farmers themselves, coming 
from all parts of the world, are strangers. With ignorance of each 
others’ peculiarities they are naturally suspicious and distrustful. 
Years are required to bring about effective cooperation even in the 
most obvious matters. 

There exist in the newly developed communities none of the condi- 
tions which have made cooperative efforts or rural credits a success In 
the older countries where a whole neighborhood thinks and acts alike 
on most essentials and where each man knows intimately the affairs 
of his neighbor and of his father and grandfather before him and can 
safely predict what will take place under a range of known and proved 
conditions. Ultimately, we may expect a development such that the 
irrigation community will act as a unit, but many years must elapse 
during which individual farmers must struggle, each learning for 
himself the lesson of the need of cooperative effort. 

_ The trouble with many of the irrigation schemes of the West 1s 
not so much a lack of skill on the part of the farmer, although this 
has often been an important factor. The cause hes rather in the 
wrong ideas about the types of farming that are feasible under the 
conditions which prevail locally. This has naturally led to wrong 
ideas about the size of farm necessary for economic.success, and the 
same mistake has led to an inflation of land prices. 

- We must have more complete knowledge concerning the successful 
irrigators and also develop that individual and community frugality 
and self help, such as has pushed into the front rank the agricultural 
efforts of Denmark, where the discouragements of poverty and dis- 
aster have served only to eliminate the wealkings and to develop 
methods and results far surpassing those of lands more highly favored 
by nature. 

How to revive.—The first reply to the question of how to revive 
irrigation development is to the effect that public money or credit 
should be used to subsidize or bring about some more or less direct 
form of subvention. This is the quick and easy solution nowadays 
offered to every big economic problem whether of agriculture, mining, 


6 


or transportation. Whenever any one of these or any allied industry 
of broad public importance begins to languish, the panacea is to get 
the great intangible public to pay the bill for the reason that the 
public may be the beneficiary. This is true of irrigation develop- 
ment. As shown above, the investor puts in a million dollars, causes 
the creation of several million dollars of values which go to the 
immediately surrounding community and to everyone except himself. 
He loses generally the interest on his investment and may consider 
himself lucky if he gets back even a part of the original outlay. If 
the public is benefited why should not the public pay for the benefit? 

Irrigation district.—There is, however, an intermediate course and 
one by which it has been found practicable to put the cost more 
directly upon the immediate community benefited. This is through 
the formation of irrigation districts, public corporations, or munici- 


palities having the power of self taxation and the ability to distribute ~ 


the profits or losses with a more near approach to equity than through 
almost any other scheme of financing. The irrigation district, 
which should embrace all of the property benefited, can levy taxes 
for the construction, operation, and maintenance of the works 
and collect these through the well-tried channels of handling public 
funds, such as have been developed through centuries of experience. 


The irrigation district can also assume heavy debts or obligations _ 


and under favorable conditions, borrow some of the money adequate 
for the construction of large works, this money being loaned on the 
security of all of the property in the district plus the additional 
security which will be created by the safe investment of the money 
thus borrowed. 

The district plan, however, presents one unfavorable feature which 
the law or regulation must not fail to recognize, viz, that the popu- 
lation of these districts is a rural population. Few of the settlers 
have had any extended experience in business enterprises or in affairs 
of any large moment. There must be some advisory or supervisory 
tribunal outside the district that will pass upon the general features 
of the enterprise, including the issuance and sale of the bonds or 
other ways of raising the money, and that will see that the necessary 
annual tax is levied and collected to meet the interest and maturing 
principal. 

By way of illustration may be cited the case of an irrigation dis- 
trict which several years ago voted over $7,000,000 of bonds for the 
construction of the necessary irrigation works for reclaiming the lands 
in the district. The voters in that district consist largely, if not 
entirely, of people who are quite poor and who settled upon the 
land because it was free. They did not have the money to purchase 
land or the means to leave after they had settled and found that 
water could not be secured for the irrigation of their lands. The only 


Lb 


7 


thing that saved the country from having another large irrigation 
failure was the fact that the bonds could not be sold. 

It is simply ridiculous to assume that an enterprise requiring that 
large amount of money should be passed upon and financed by 
people without business experience. It shows how serious mistakes 
may result through the district plan unless there is some tribunal 
with business experience that may act in an advisory or supervisory 
- capacity in financing and handling the funds of the district. 

The State laws should provide that the taxes levied by irrigation 
districts shall be collected by the county tax collector as other State, 
county, and municipal taxes, instead of by the district collector, as 
the law now provides in some States. They should provide, further, 
that if for any reason the board of directors of the district fail or 
neglect to levy the necessary tax to meet the maturing interest or 
principal of bonds the board of county commissioners shall levy the 
same. This safeguard is necessary both from the standpoint of the 
Government in districts having Federal obligations or contracts upon 
which payments must be made, as well as necessary to protect the 
investing public who purchase bonds. 

In working out any ideal scheme it is necessary, however, that 
there be some real value in the irrigation district. It is obvious that 
if it consists simply of undeveloped land and untried plans the mere 
formation of a district and formulation of these plans affords no real 
security. Here has been the rock upon which have been wrecked 
many hopes of development. In the early days of the irrigation 
district the necessary safeguards were not known nor observed, and 
millions of dollars in stocks and bonds were issued against undeveloped 
land which was to be rendered highly valuable. The fact, however, 
that great losses have been incurred is not necessarily a proof that 
the system, with adequate checks and safeguards, can not be made to 
succeed. We now have the benefit of a wide experience, one which 
instead of discouraging tends to encourage the belief that success can 
be attained along this line. 

The safeguards which it is now proposed to throw about the irriga- 
tion district, and which will enable the good features to be developed 
without incurring the dangers of the past, lie along the line of publicity 
or public supervision and regulation. It is urged that the State or 
National authorities, with larger viewpoint and with skilled and com- 
petent men at hand, are now in a position to pass upon the various 
schemes for engineering and financing the irrigation districts, and by 
proper use of the facilities at hand the public authorities can put 
their stamp of approval or disapproval upon the plans. If satis- 
factory the irrigation district may then proceed to carry out the 
development with reasonable assurance on the part of the taxpayers 
and of the investing public that the scheme is desirable and feasible. 


8 


Guaranteeing the district—Because of the discredit which has 


attached to irrigation securities, the proposition has been made 


that a further step be taken beyond mere public supervision, namely, 


that to insure public confidence the State or Nation, acting through | 


legislative authority, should underwrite the securities or at least 
guarantee the payment of a low rate of interest, say, 4 percent. One 
suggestion is that this should be done by the Federal Government, 


using for this purpose the reclamation fund or rather the security - 


created by the investment of this fund. A modification of this is 
that the State should join and the State and National authorities 
each assume one-half of the risk. The argument for this latter 
proposition is that the State, having more immediate knowledge and 
interest in the enterprise and certain duties in connection with the 
water supply, should make use of its facilities for aiding in the work. 
There would also be far less tendency to urge questionable schemes 
upon the Federal authorities if the State had its share of the respon- 

sibility. . 
_ Subvention—From careful consideration given to the subject if it 
now appears that the revival of many important irrigation projects 
can come only through some form of subvention or aid rendered by 
the Government in the form of a bonus or guaranty, then this fact 
should be clearly developed and convincing arguments given by 
which the needs and benefits may be clearly shown. It is to be 
noted in this connection that the reclamation act offers a most im- 
portant precedent in that the Government furnishes the money with- 
out profit and without interest. If there should be figured as a con- 
tribution by the Government an interest of 3 or 4 per cent earned 
but not collected, it will be seen that this gift is a very substantial one. 

Duty of State—While there has been much discussion of State 
rights and contention over control of interstate waters, there has been 


relatively little thought given to the duty of each State in affording: 


necessary protection to the water rights which have been acquired 
and in limiting these to beneficial use. Even less consideration has 
been given to the protection of the investor in irrigation works. In 
fact, the attitude as seen by the eastern man is apparently that of 
attempting to attract the investor, and then, when his money is spent, 
neglecting to afford him the protection which will insure the safe 
return of the money. As a.consequence of the failure of State offi- 
cials, notably some of the State land boards, to accept their responsi- 
bilities, the investors in general have become wary of having further 
dealings in such matters. 

On this point Mr. Oliver O. Haga, in his admirable address on 
‘‘Needed Legislation for Development of the Water Resources of the 
State,” says: ‘‘The State owes a duty both to the man on the land 
and to the nonresident investor, and it should realize its full respon- 


tee 


9 


sibility to each. * * * Until drastic action is taken by the State 
the confidence of the investing public in irrigation securities could 
not be restored. The law should assume that the investor follows 
the rule of ‘safety first.’”’ 

Conclusions—The revival of irrigation will come largely as a 
steady normal growth of good business practice such as underlies all 
successful industry. No one single act can bring about such revival, 
but rather the working together of a number of factors which may be 
summed up as follows: 

First. The wrigators now on the ground must make good to a 
larger degree and demonstrate to the world their ability to produce 
higher average crop values, increasing the net return per family. 

_ Second. More good farmers must be had to utilize the land which 
has already been reclaimed. 

Third. Cooperation must be developed not only in handling the 
crops and products to obtain better prices, but also in the selection 
of the kind of crops to plant and in purchasing supplies and reducing 
the cost of farming operations. 

Fourth. Better credit must be established through cooperative 
effort and lower interest rates secured based largely on mutual con- 
fidence and support as well as upon better financial system. 

Fifth. The State must do its part not only in protecting the water 
rights of the farmers, but in safeguarding the investments. eo 
made. 

Sixth. The irrigation district laws and similar enactments should 
be unified in the various States, strengthened, and improved, so as to 
make them more effective. 

Seventh. The Federal Government in cooperation with the State 
and acting through effective irrigation districts or similar organiza- 
tions should aid in the procuring of additional capital for new and 
meritorious undertakings. 


WASHINGTON : GOVERNMBNT PRINTING OFFICE : 1915 








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